Latin America’s Global Middle Class: A Preference for Growth over Equality

Abstract

The middle class plays an important role in explaining comparative development as a source of consumption demand, innovation and political support for the public provision of infrastructure, health and education. The middle class has sufficient discretionary income to satisfy an increasing desire for consumption that drives the demand for higher-quality goods (Schor, 1999). This means that the demand for consumer durables increases rapidly as household income passes a critical threshold, normally associated with middle-class status. From a production standpoint, meanwhile, the middle class is sometimes identified with entrepreneurship and the corresponding side effects on job creation, innovation and the strengthening of a country’s productivity: this sequence of quality-improving innovations is argued to be the engine of economic growth (Aghion and Howitt, 1992). The middle class also plays an active role in domestic politics, in promoting democratic attitudes, favoring progressive political platforms and providing a strong constituency for public investment in human and infrastructure capital that is vital for long-term economic growth (OECD, 2010). But on occasion the middle class can be a regressive force, using their political clout to protect their own position by encouraging populist policies like subsidies for pensions, housing and universities that can generate macroeconomic instability and undermine democracy and economic growth alike.